My 457(b) contains some very good Blackrock index funds that are very low in cost (for example, their S&P 500 fund is only .01 basis point....wow!).

However....my quarterly statements never seem to reflect income from dividends, even though these funds have a yield and supposedly distribute dividends.

The 457(b) is managed by ING, so I called customer service and was told that the dividends are indeed distributed, but...through some magical accounting wizardry that I don't understand, the dividends are reflected somehow in the share price of the index fund and not as actual dividend distributions.

Does anyone else have a retirement vehicle like this where your dividends are reflected in the share price of the fund? And doesn't this make it hard to reinvest the dividends in the fund?

I also have a 457b plan with a Blackrock-managed S&P 500 CIT with a 0% ER (although the plan has a 0.129% admin fee). Every quarter, I tend to get 20 cents or so as dividends. Comparing the annual performance to Morningstar's S&P 500 growth information (price + dividends) shows that they track very closely, so it appears that the dividends are rolled into the NAV.

There was a thread a few weeks ago discussing this situation in a 401k plan with CITs:

Frank2012 wrote:Thank you for the info, Skylar. Much appreciated. I had not heard about a "Collective Investment Trust" before. Many thanks!

You're very welcome. If it makes you feel better, I hadn't heard of CITs before I started using this 457b either. Since they're not regulated like mutual funds and don't have a ticker symbol, I would be very leery about investing in any CIT that's not an index fund. At least with index funds you can go to Morningstar and compare performance easily.

While not exactly the same thing, many people invest in the TIAA-CREF variable annuities. There are never any dividends paid out. A mutual fund is required to pay out the dividends it receives which for stock funds results in a drop in NAV (and prompts all the questions on that topic). Your CIT and the T/C variable annuities are not required to pay out the dividends received, and the NAV only drops when the underlying assets drop in value. You can think of your CIT as reinvesting all the dividends it gets within each share, so the NAV doesn't drop when it receives and reinvests those dividends. You don't get more shares, but the shares you have are worth more than if the dividends were paid out and actually reinvested.

Frank2012 wrote:Does anyone else have a retirement vehicle like this where your dividends are reflected in the share price of the fund? And doesn't this make it hard to reinvest the dividends in the fund?

As noted, those will be collective investment trusts, and not having specific dividends is pretty typical. It's the same for all funds at MyMegaCorp, except the company stock fund. That pays dividends, which can be distributed in-service for some reason or the other.